ABSTRACT Pneumonia followed by sepsis remains a major cause of mortality, morbidity and health care burden in the U.S. and world. Pneumonia is also the important cause of acute respiratory failure leading to acute lung injury (ALI) or its severe form, acute respiratory distress syndrome (ARDS). Despite decades of research into the pathophysiology of ALI/ARDS, no effective pharmacological treatments are available. Although neutrophil accumulation and proper function of neutrophils in the lungs and extrapulmonary organs are a critical defense to bacteria, excessive neutrophil influx can induce severe organ damage. Thus, a better understanding of the innate defense mechanisms, which regulate neutrophil influx and function, is critical to designing improved therapeutics for pneumonia. We have focused on Klebsiella pneumoniae, since this bacterium causes extensive lung damage followed by sepsis, involves neutrophils that are crucial to control K. pneumoniae infections, the spread of carbapenem-resistant K. pneumoniae (CRKP), and due to the lack of effective vaccine for K. pneumoniae. Stem cells have been shown to possess anti-inflammatory properties that can be used to treat infectious and inflammatory lung diseases similar to ALI/ARDS. One such therapy involves the administration of bone marrow-derived mesenchymal stem cells (BMSCs), which represent a cell population originally isolated from the stromal compartment of bone marrow although these cells lack cell surface markers of the hematopoietic lineage. Although BMSCs are considered to be a promising therapeutic strategy, our preliminary data demonstrate that Lung mesenchymal stem cells (LMSCs) are superior to BMSCs with regard to host protection and bacterial clearance. However, their biological properties and therapeutic potential in bacterial pneumonia-induced sepsis have not been explored. Therefore, the goal of the investigation is to explore the biological properties, therapeutic potential and the immunomodulatory properties of stem cell antigen positive LMSCs (Sca1+ LMSCs) in a preclinical model of pneumonia-induced sepsis. Our hypothesis is that the lung derived Sca1+ LMSCs induce host protection against K. pneumoniae pneumonia-induced sepsis via interaction with neutrophils because, selective depletion of neutrophils results in substantial impairment in the clearance of K. pneumoniae from the lungs. To test our hypothesis, we propose two specific aims. Aim 1: To explore whether LMSCs can induce host protection against Klebsiella pneumoniae infection (in vivo): and Aim 2: To investigate whether LMSCs can modulate PMN function (in vitro). The application proposes a proof-of- concept study to determine the role of LMSCs in bacterial pneumonia. Successful completion of these exploratory studies will lay the foundation for future translational initiatives in pneumonia-induced sepsis patients.